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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by Dan Taylor
The UCP was not revised between 1933 and 1951 due to a number of factors. For most of this period, World War II occupied the attention of most countries that would have been involved in any revision. ICC itself did not function as an organization during much of this time. Finally, because of the worldwide conflict, trade between nations dropped significantly and, in many cases, was nonexistent. Only after World War II when trade increased quickly and in significant amounts did the attention of the world’s banks again focus on the UCP.
In January 1949, members of the Committee on Foreign Banking were asked by ICC to submit suggested changes to the UCP. A year later, in 1950, representatives of the Committee on Foreign Banking went to Paris to attend a meeting of the ICC Committee on Banking Technique to discuss the revisions of the UCP and to present the US positions. These representatives included Wilbert Ward of National City Bank, Chairman of the ICC Committee on Banking Technique, and Henry Harfield of Shearman & Sterling.
In January 1951, the new United Nations headquarters was opened in New York, and the world’s first commercial computer, UNIVAC 1, was delivered to the US government to be used by the Census Bureau. World trade was growing significantly after the war. In 1951, the International Bureau of Chambers of Commerce (IBCC) was created by the ICC. It quickly became a focal point for cooperation between chambers of commerce in developing and industrial countries. The world’s banking sector began to focus on international relationships and on the work of the ICC’s Committee on Banking Technique.
On 7 June 1951, the Chairman of the Committee on Foreign Banking, Philip Swart, went to the ICC meeting in Lisbon, Portugal, to encourage the adoption of the revised UCP. On 14 June 1951, the revised UCP draft was accepted and became effective on 4 October 1951. At ICC’s 13th Congress, the revised UCP was adopted for implementation as Brochure No. 151. US banks then adopted the revised UCP, limiting it to export credits and again referring to the export quotations as the Revised American Foreign Trade Definitions. This adoption in the US was effective on 1 January 1952.
It was not until 1956, however, that the US adopted the UCP as rules applying to all letters of credit, both import and export. With the general acceptance of Incoterms, and full adherence to the UCP in 1956, use of the Revised American Foreign Trade Definitions and “Guiding Provisions” became irrelevant to the practice of letters of credit in the US.
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As major changes from the 1933 UCP, the 1951 version:
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Brochure 151
GENERAL PROVISIONS
The provisions, definitions, interpretations, etc. contained in the following Articles are to be understood as uniform directions applying to all commercial documentary credits including authorities to pay, accept, negotiate or purchase, unless otherwise expressly agreed. It is essential that instructions embodied in commercial documentary credits be complete and precise in every way and any attempt to include technical terms or cumbersome details should be discouraged in order to guard against the possibility of confusion and misunderstanding.
The beneficiary of a credit can in no case avail himself of the legal relations existing between Banks, or between the applicant for the credit and his Bank.
A. FORM OF CREDITS
ARTICLE 1
Commercial documentary credits are essentially distinct transactions from sales contracts, on which they may be based, with which Banks are not concerned.
ARTICLE 2
Commercial documentary credits may be either:
a) revocable or
b) irrevocable.
ARTICLE 3
All credits, unless clearly stipulated as irrevocable, are considered revocable even though an expiry date is specified.
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ARTICLE 4
Revocable credits are not legally binding undertakings between Banks and beneficiaries. Such credits may be modified or cancelled at any moment without notice to the beneficiary. When a credit of this nature has been transmitted to a branch or to another Bank, its modification or cancellation can take effect only upon receipt of notice thereof by such branch or other bank, prior to payment or negotiation, or the acceptance of drawings thereunder by such branch or other Bank.
ARTICLE 5
Irrevocable credits are definite undertakings by an issuing Bank and constitute the engagement of that Bank to the beneficiary or as the case may be, to the beneficiary and bona fide holders of drafts drawn thereunder that the provisions for payment, acceptance or negotiation contained in the credit, will be duly fulfilled provided that the documents or as the case may be, the documents and the drafts drawn thereunder comply with the terms and conditions of the credit.
When the issuing Bank instructs another Bank to confirm its irrevocable credit and when the latter does so, the confirmation implies a definite undertaking of the confirming Bank as from the date on which it gives confirmation.
In case of credits available by negotiation of drafts, the confirmation implies only the undertaking of the confirming Bank to negotiate drafts without recourse to drawer.
Such undertakings can neither be modified nor cancelled without the agreement of all concerned.
When a correspondent is instructed by cable or telegram to notify a letter of credit, the issuing Bank must send the original of the said letter of credit to the said correspondent if it is intended to put the document itself into circulation. If any other procedure were followed, the issuing Bank would be responsible for all consequences which may result therefrom.
ARTICLE 6
Irrevocable credits may be advised to the beneficiary through an advising Bank without responsibility on the latter’s part.
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ARTICLE 7
When a Bank is instructed to issue, confirm or advise a credit similar in terms to one previously issued and the credit to which reference is made contains amendments, it shall be understood that the details of the credit being issued, confirmed or advised will be transmitted to the beneficiary inclusive of the amendments, unless instructions to the contrary are contained in the instructions.
ARTICLE 8
In the event of the period of validity of a credit not being stipulated in an order to issue or confirm an irrevocable credit, the Bank may advise the beneficiary of the credit for information only, and this implies no responsibility on the part of the Bank doing so. The credit will only be issued or confirmed later when supplementary details on the duration of validity have been received.
B. LIABILITY
ARTICLE 9
Banks must examine all documents and papers with care so as to ascertain that on their face they appear to be in order.
ARTICLE 10
In documentary credit operations, all parties concerned deal in documents and not in goods. Payment, negotiation or acceptance against documents in accordance with the terms and conditions of a credit by a Bank authorized to do so binds the party giving the authorization to take up the documents and reimburse the Bank making the payment, negotiation or acceptance.
If the documents, on their face, are not as stipulated by the terms and conditions of the credit, the issuing Bank must, upon receipt of the documents, determine, on the basis of the documents alone, whether or not to claim that payment, negotiation or acceptance was not made in accordance with the terms and conditions of the credit.
If such claim is to be made, notice to that effect, stating the reasons therefor, must be given by cable or other expeditious means to the Bank demanding reimbursement and such notice must state that the documents are being held at the disposal of such Bank or are being returned thereto. The issuing Bank shall have a reasonable time to examine the documents.
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ARTICLE 11
Banks assume no liability or responsibility for the form, sufficiency, correctness, genuineness, falsification or legal effect of any documents or papers, or for the description, quantity, weight, quality, condition, packing, delivery or value of goods represented thereby, or for the general and/or particular conditions stipulated in the documents, or for the good faith or acts of the consigner or any other person whomsoever, or for the solvency, standing, etc. of the carriers or insurers of the goods.
ARTICLE 12
Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of any messages, letters and/or documents, or for delay, mutilation or other errors in the transmission of cables, telegrams, or other mechanically transmitted messages, or for errors in translation or interpretation of technical terms, and Banks reserve the right to transmit credit terms without translating them.
ARTICLE 13
Banks assume no liability or responsibility for consequences arising out of the interruption of their business either by a decision of a public authority, or by strikes, lockouts, riots, wars, acts of God or other causes beyond their control. On credits expiring during such interruption of business, Banks will be able to make no settlement after expiration unless specifically authorized.
ARTICLE 14
Banks are authorized to make provision for credits with other Banks, for the account and at the risk of the applicants for the credits.
Banks utilizing the services of another Bank assume no liability or responsibility (unless they themselves are at fault) should the instructions they transmit not be carried out exactly, even if they have themselves taken the initiative in the choice of their correspondent.
The applicants for the credit are responsible to the Banks for all obligations imposed upon the latter by foreign laws and customs.
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C. DOCUMENTS
ARTICLE 15
Unless otherwise instructed, Banks consider themselves authorized to honour the documents which they judge necessary, if presented in a suitable form, viz:
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Banks have the right to waive insurance papers on proof satisfactory to them that the insurance is covered.
ARTICLE 16
Except as stated in Article 23, the date of the Bill of Lading, or date indicated on the reception stamp of the Railway or Inland Waterway Bills of Lading or Consignment Notes, Counterfoil Waybills, Postal Receipts, Certificates of Mailing, Air Mail Receipts, Air Transportation Waybills, Consignment Notes or Receipts, Trucking Companies Bills of Lading, or other shipping documents will be taken in each case to be the date of shipment of the goods.
ARTICLE 17
Proof of payment of the freight will be considered sufficient if the words “freight paid” or “freight prepaid” or words of similar import appear by stamp or otherwise on the shipping documents. If the shipping documents contain the words “freight pre-payable” or “freight to be prepaid” or words of similar import, they will not be accepted as constituting evidence of the payment of freight.
ARTICLE 18
Shipping documents bearing reservations as to the apparent good order and condition of the goods and the packaging may be refused.
A clean shipping document is one which bears no superimposed clauses expressly declaring a defective condition of the goods or packaging.
The following should not be considered such reservations: a) clauses which do not expressly state that the goods or packaging are unsatisfactory, e. g. “second-hand cases”, “used drums”, etc.; b) clauses which emphasize carriers’ non-liability for risks arising through the nature of the goods or the packaging; c) clauses which disclaim on the part of the carrier knowledge of contents, weight, measurement, quality, or technical specification of the goods.
Unless otherwise specified in the credit or inconsistent with any of the documents presented under the credit, banks may honor documents stating that freight or transportation charges are payable on delivery.
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Bills of Lading
ARTICLE 19
When Sea or Ocean Bills of Lading are required, the following may be accepted:
Regardless of the type of Bills of Lading required by a credit (including “Shipped” or “On Board” Bills of Lading), Bills of Lading which, apart from printed clauses, permit transshipment enroute, may be accepted provided the entire voyage is covered by one and the same Bill of Lading. If expressions such as “direct shipment”, “without transshipment” or “transshipment not permitted” are used in credits, Bills of Lading which do not specifically indicate that the merchandise is to be transshiped may be accepted.
ARTICLE 20
Bills of Lading issued by forwarding agents will be refused, as also Bills of Lading for shipment by sailing vessels.
Bills of Lading which are issued under and are subject to the conditions of a Charter Party are only accepted under special instructions to that effect.
ARTICLE 21
Banks have the right to refuse Bills of Lading mentioning the stowage of goods on deck but may accept such Bills of Lading when the documents presented include an insurance policy or certificate mentioning that the goods are stowed on deck.
ARTICLE 22
When shipment by steamship is required, Banks may consider themselves authorized to accept Bills of Lading for shipment by motor vessels or vice-versa.
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ARTICLE 23
When a shipment is stipulated “On Board”, the loading on board can be evidenced by means of a notation signed or initialled on behalf of the carrier. If the Bill of Lading is presented after the ultimate “shipment date” specified in the credit, the said notation must be dated and this date shall be considered as the date of loading on board and shipment.
ARTICLE 24
Banks have the right to require that the name of the beneficiary of the credit appears on the Bill of Lading as shipper or endorser.
Railway Bills of Lading, etc.
ARTICLE 25
Banks will consider Railway or Inland Waterway Bills of Lading or Consignment notes, Counterfoil Waybills, Postal Receipts, Airway Bills or Receipts, or Trucking Bills of Lading as regular when they bear the reception stamp of the carrier, or issuer, or when they bear a signature.
ARTICLE 26
When an attestation or certificate of weight is required in the case of railway transport, Banks may refer to the indications contained in the shipping documents, on condition that weighing has been duly witnessed by means of a weight stamp or other official means. A weight attestation will only be required on special request.
ARTICLE 27
If, in the case of shipment by rail, by inland waterway, by truck, by air, or by post, the name of the beneficiary does not appear on the transport documents, Banks may require them to be countersigned by him.
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Insurance
ARTICLE 28
Policies and Certificates of Insurance issued by companies or their agents or by brokers or by underwriters are acceptable.
Unless otherwise specified, such insurance must be issued in the currency of the credit and Banks may, in their discretion, refuse any Insurance Policies or Certificates presented if they bear a date later than the date of shipment as evidenced by the shipping documents.
ARTICLE 29
The minimum value insured must be the C. I. F. value of the goods as evidenced by the documents tendered, but in no case should it be less than the amount of the drawings under the credit, or than the amount of the commercial invoice if the latter is higher.
ARTICLE 30
Failing instructions as to the risks to be covered or when a credit stipulates that insurance cover “usual risks” or “customary risks” or insurance requirements of similar import, Banks may accept insurance documents as tendered without responsibility on their part.
ARTICLE 31
When a credit stipulates “Insurance against all Risks” Banks can in no way be held responsible if any particular risk is not covered.
When a credit provides for insurance “with particular average” Banks may accept insurance policies or certificates which indicate that such particular average is subject to a franchise unless it is specifically indicated in the credit that the Particular Average Insurance must be issued “irrespective of percentage.”
Invoices
ARTICLE 32
Invoices must be made out in the name of the applicant for the credit or in the name of any other person as required in the credit.
Payment of such invoices may be refused if they have been issued for an amount in excess of the credit amount.
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ARTICLE 33
The description of the goods in the Commercial Invoice must correspond with the description in the credit. Wherever the goods are described in the remaining documents, description in general terms will be acceptable.
Other Documents
ARTICLE 34
When other documents are required, such as: Warehouse Receipts, Delivery Orders, Consular Invoices, Certificates of Origin, Certificates of Weight, of Quality or of Analysis etc., without further definition, Banks may accept such documents as tendered without responsibility on their part.
D. INTERPRETATION OF TERMS
ARTICLE 35
The terms “about”, “circa” or similar expressions are to be construed as allowing a difference not to exceed 10% more or less applicable, according to their place in the instructions, to the amount of the credit or to the quantity or unit price of the goods.
When the credit does not specify quantity in terms of packing units or containers or individual items, a difference of 3% more or less will be allowed on the total quantity specified in the credit, even if the terms of the credit call for a fixed weight or measurement, unless the credit expressly stipulates that the quantity specified may not be exceeded or reduced.
Partial Shipments
ARTICLE 36
Unless otherwise expressly stipulated, Banks may pay, accept or negotiate for partial shipments, even though the credit mentions the name of a vessel and when partial shipment is made by that vessel.
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ARTICLE 37
If shipment by instalments within given periods is specified, each instalment shall be treated as a separate transaction. The instalment not shipped within a given period cannot be added to subsequent shipments and is considered as ipso facto cancelled. Banks may, however, pay against documents for subsequent shipments provided they are made within the given periods.
Maturity or Validity
ARTICLE 38
All irrevocable credits must stipulate an expiry date for payment, acceptance or negotiation notwithstanding the indication of a date of shipment.
ARTICLE 39
The words “to”, “until”, “till” and words of similar import applying to dates of maturity for payment, acceptance, negotiation or shipment are understood to include the date mentioned.
ARTICLE 40
When the stipulated expiry date falls on a Sunday or legal or local holiday, or upon any other closing day for the Banks, the last day of the period of validity will be extended until the first following business day. This does not apply to the last day for shipment which must be respected whatever the day.
ARTICLE 41
The validity of a revocable credit, if no date is specified, will be considered to have expired six months from the date of the notification sent to the beneficiary by the Bank with which the credit is available.
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Shipment, Loading at Dispatch
ARTICLE 42
“Prompt”, “immediately”, “as soon as possible”, etc.: these terms and others of similar import, are to be interpreted as a request for shipment within thirty days from the notification to the beneficiary, unless a date has been stipulated.
When the words “departure”, “dispatch”, or “loading” are used in Commercial Documentary Credits for the fixation of the latest date for shipment of the goods, and unless specific evidence in respect thereto is required, the Banks will consider these words as synonymous to “shipment”, and they may be guided by the date appearing upon the Bills of Lading or other shipping documents. Presentation
ARTICLE 43
Documents must be presented within a reasonable time after issuance. Paying, negotiating or accepting Banks may refuse documents if in their judgment, they are presented to them with undue delay.
ARTICLE 44
Banks are under no obligation to accept documents outside their banking hours.
Extension
ARTICLE 45
Any extension of the period for shipment shall extend for an equal period the time fixed for presentation or negotiation of documents or drafts, but an extension of a date for presentation or negotiation of documents or drafts shall not extend a time fixed for shipment unless expressly stated.
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Date Terms
ARTICLE 46
The terms “first half ”, “second half ” of a month shall be construed respectively as from the 1st to the 15th, and the 16th to the last day of each month, inclusive.
ARTICLE 47
The terms “beginning”, “middle”, or “end” of a month shall be construed respectively as from the 1st to the 10th, the 11th to the 20th, and the 21st to the last day of each month, inclusive.
ARTICLE 48
When a credit is opened by an opening Bank requesting that the credit be advised or confirmed as good “for 1 month”, “for 6 months”, or the like, but the opening Bank has not specified the date from which the time is to run, the advising or confirming Bank may advise or confirm the credit as terminating at the end of the corresponding period from the date of its advice or confirmation.
E. TRANSFER
ARTICLE 49
A transferable or assignable credit is a credit in which the paying or negotiating Bank is entitled to pay in whole or in part to a third party or parties on instructions given by the first beneficiary.
A credit can be transferred only on the express authority of the opening Bank and provided that it is expressly designated as “transferable” or “assignable”. In such case the credit can be transferred once only (that is to say that the third party or parties designated by the first beneficiary are not entitled to retransfer it), and on the terms and conditions specified in the original credit, with the exception of the amount of the credit, of any unit price stated therein, and of the time of validity or of shipping, any or all of which may be reduced or curtailed. In the event of any reduction in amount or unit price, a transferer may be permitted to substitute his own invoices for those of the transferee, for amounts or unit prices greater than those set forth in the transferee’s invoices, but not in excess of the original sum stipulated in the credit, and upon such substitution of invoices, the transferer may draw under the credit for the difference between his invoices and the transferee’s invoices.
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Fractions of a transferable or assignable credit (not exceeding in the aggregate the amount of the entire credit) may be transferred separately provided partial shipments are not excluded, and the aggregate of such transfers will be considered as constituting only one transfer of the entire credit.
Authority to transfer a credit includes authority to transfer it to a beneficiary in another place whether in the same country or not, unless otherwise specified.
During the validity of the credit as transferred, payment or negotiation may be made at the place to which the credit has been transferred.
Bank charges entailed by transfers are payable by the first beneficiary unless otherwise specified.
No transfer shall be binding upon the Bank which is to act thereunder except to the extent and in the manner expressly consented to by such Bank, and until such Bank’s charges for transfer are paid.
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Adherence of the United States banks, which have subscribed to these regulations, is effective January 1, 1952.
NOTE: In the U.S.A. the Definitions of Export Quotations, which are now in wide use, are known as the “Revised American Foreign Trade Definitions – 1941” adopted July 30, 1941.
Distributed byBankers’ Assosiation for Foreign Trade (U. S. A.)andCommittee on Foreign Banking New York, N. Y.